1. Globalisation & International management Flashcards
topic 1
1
Q
International business activity
A
Any commercial activity (trade and FDI) that crosses international borders.
> It affects every part of the supply chain and is impacted by a range of national and global regulators.
2
Q
Foreign direct investment
A
A multinational firm’s ownership (partly or wholly) of an operation in another country.
3
Q
2 challenges facing international businesses
A
- International volatility - tensions, differences, uncertainty, disputes and competition surrounding global trade, politics, religions and cultures. Also includes volatility in commodity prices and currency values.
- Technological sophistication - lack of ICT in some regions
4
Q
Managerial competence
A
5 functions of a manager:
- Planning
- Organising
- Leading/directing
- Coordinating
- Controlling
5
Q
Planning
A
choosing organisational goals and the strategies/actions needed to achieve these
6
Q
Organising
A
Organising resources (financial, labour and physical) to achieve organisational goals
7
Q
Leading
A
Motivating, influencing and persuading employees to achieve organisational goals
8
Q
Coordinating
A
Working with and ensuring staff are working towards a common organisational goal
9
Q
Controlling
A
Evaluating and regulating organisational activities by measuring and comparing
10
Q
Multicultural competence
aka cross-cultural skills
A
Understanding, working effectively across cultures and capitalising on cultural diversity to get things done through people
11
Q
International management
A
The process of developing strategies, designing operating systems, and working with people around the world to ensure sustained competitive advantage
IM = managerial competence + multicultural competence
12
Q
Globalisation
A
international linkage; global competition characterised by networks of international linkages comprising of economic, financial, political, and social markets that bind countries, institutions, and people in an interdependent global economy
13
Q
Results of globalisation
A
- free trade
- migration
- FDI and movement of money across international borders
- movement of technology and information (skills, knowledge through skilled migrant workers) across borders
14
Q
economic integration
A
lessening of trade barriers + increased trade, investment and movement around the world
15
Q
some causes of globalisation
A
- lessening of trade barriers
- migration
- tech advancements
- travel/tourism
- increased trade
- rise of emerging markets
- evolving political landscapes
- global competition for global consumers
16
Q
why some argue globalisation is slowing and declining
A
- political crises
- cybertheft
- protectionist policies stemming from nationalism
increase in trade barriers
17
Q
semi-globalisation
A
Ghemawat’s argument that only 10-25% of economic activity is ‘truly global’ as most types of economic activity that can be globalised is still quite localised by countries
- unevenly globalised world
- evolving fragmentation
18
Q
globalisation of markets
A
market driven, the convergence of buyer preferences in markets around the world
19
Q
strengths of globalisation of markets
A
- standardisation resulting in cost reductions
- permits for export opportunities when home markets are saturated/surplus (supply>demand)
20
Q
standardisation
A
creation of uniform practices producing in one nation and distributing from there
21
Q
distributor vs agent
A
agent - sells products on your behalf
distributor - purchases products from you and then sells at their discretion
22
Q
globalisation of production
A
dispersal of production activities to locations around the world (offshoring)
23
Q
strengths of globalisation of production
A
- lower production costs
- choose to produce with high-quality producers of a particular good
- allows for co-location of production with essential process inputs which improves supply chain efficiency
24
Q
globalisation of services
A
services being consumed outside of the time and place where they are produced (across borders) through the use of technology
25
outsourcing
production of any particular part of a manufactured product occurring in a different country from where it is manufactured and packaged
26
offshoring
taking an entire function of a business (eg. production/manufacturing, call centres) and putting it in another country
27
strengths of globalisation of services
- lower labour costs
- lower production costs
- comparative advantage
28
globalisation of human capital (labour)
the outsourcing or offshoring of jobs to other countries and the focus of global firms on winning global skilled talent
29
reshoring
returning a function of a business from the country it was offshored to and back to the original country; undoing of offshoring
30
near-shoring
outsourcing business processes to companies in nearby countries, often those a border is shared with or located in the same region
31
friend-shoring
sourcing or manufacturing products in countries considered political and economic allies to us
32
strengths of globalisation of labour
- lower production costs
- reduction of reliance on potentially risky or unreliable trade partners
- increase in talented staff with sought after skills
33
6 key global trends
1. Changing balance of growth toward emerging markets more than developed markets, and the growth in the middle-class in these markets that are rich in population.
2. Need for increased productivity and consumption in developed countries to stimulate their economies.
3. Increasing global interconnectivity (globalisation).
4. Widening gap between supply and demand of natural resources, in particular to supplying developing economies -- especially resources that facilitate green and digital transitions due to the push for environmental protection.
5. Challenge for governments to develop policies for economic growth and financial stability.
6. Growing number of emerging-market companies embracing digital technologies.
34
Globalisation in recent years
- trade wars
- COVID19
- wars and political instability
- geopolitics increasing in influence
- connector economies
- nearshoring, offshoring, reshoring
- reshaping of global economy
35
connector economies
economies that do not choose a side of the USA-China geopolitical divide, trade with both and get benefits from both
36
reshaping of global economy
interlinked global economy, business will continue to be done and money will continue to flow around the world despite the existence of tensions at government-government levels as organisations will look for a way around these political divides
37
MITI-V
Malaysia
Indonesia
Thailand
India
Vietnam
38
what is MITI-V
a bloc that offers the world an alternative to Chinese manufacturing and supply chain activities
they are excellent manufacturers on a much smaller scale to china and as individual nations would be unable to compete with them
39
de-risk
countries restricting/reducing business (trade) relationships with countries to mitigate risks associated with economic engagement
40
decouple
complete separation of ties between two or more economies by dismantling trade and investment relationships, and severing supply chains
41
challenges for globalisation
- rekindling of nationalism leading to protectionist strategies
- increased protectionism of high-demand resources
- managers lacking international management skills; need to develop their international understanding and experience
- increasing pressure and publicity for companies to consider CSR - triple bottom line (3 P's- Profit, People, Planet)
42
effects of globalisation
- global companies becoming less tied to specific locations
- companies that desire to remain competitive will have to develop a group of experienced international managers
- small companies affect, and are affected by, globalisation
43
global manager's role
mega environment - broad external factors that affect organisation (global trends, competition, MNC-host country interdependence)
host-country environment - external factors existing in the host-country that affect organisation; localisation-dependent factors (PECTL: Politics, economy, culture, tech, local competition; subsidiary-host interdependence)
internal/operating environment - internal factors to the organisation that affect it (CSR, sustainability, ethics, skills, organisational culture, business culture and organisational culture)
44
regional economic integration (REI)
formal agreements (contractual documents) between countries in a geographic region that aim to reduce tariff and non-tariff barriers to free trade (facilitate free flow/trade) of goods, services and FoP.
levels that nations get closer and closer intertwined together
45
levels of REI
less integrated
1. FTA
2. Customs union
3. Common market
4. Economic union
5. Political union
more integrated
46
Free trade area (FTA)
- barriers to trade among members removed, some non-tariff barriers may remain
- member countries have independent external trade policies towards non-members
eg. USMCA, Closer Economic Relations (CER)
47
customs union
- barriers to trade among members removed
- common external trade policy towards non-members
eg. Andean community (Bolivia, Colombia, Ecuador, Peru)
48
common market
- barriers to trade among members removed
- common external trade policy towards non-members
- free movement of FoP
eg. MERCOSUR (Brazil, Argentine, Paraguay, Uruguay)
49
economic union
- barriers to trade among members removed
- common external trade policy towards non-members
- free movement of FoP
- common currency (monetary policy)
- harmonisation of tax rates (fiscal policy)
eg. European Union (however not complete economic union as not all members of EU have adopted euro)
50
political union
- barriers to trade among members removed
- common external trade policy towards non-members
- free movement of FoP
- independent states combined into single state under a single central government
coordinates economic, social, foreign policy
eg. EU headed towards partial political union, USA close to political union
51
strengths of REI
- economic case: REI achieves additional gains from free trade and investment beyond those attainable under international agreements.
- political case: increasing commonalities between countries makes them more interdependent and reduces likelihood of conflict and war
> idea that countries with commonality shouldnt be in conflict
> unified countries have greater influence in dealing with other nations
52
weaknesses of REI
- only makes sense when trade creation > trade diversion otherwise countries would be spending more than needed in production (ineffective interdependence)
53
trade creation
when low-cost producers within FTA replace high-cost domestic producers
54
trade diversion
when high-cost producers within FTA replace low-cost external suppliers
55
WTO
provides forum for discussion of trade matters and settlement of disputes between countries
- all 166 signatory countries are honour-bound to abide by decisions of WTO
56
General Agreement on Tariffs and Trade (GATT 1947)
aim was to iron out rules on international trade and make it easier and more accessible, as well as to provide important arbitrary role to sort out disputes resulting from trade
-- WTO administers provisions of GATT but does not exist as institution today
57
IMF 1994
set up to stabilise economies in a financial sense
- nations have to lodge certain amount of funds with IMF who uses these to assist countries in financial trouble in exchange for certain actions/behaviours/modifications
- promotes economic cooperation, international trade, employment, exchange rate stability, countries to meet payments needs
58
G7 countries
JUICE-GF
Japan
USA, UK
Italy
Canada
EU
Germany
France
59
G20 countries
JUICE-MAGICS-AT-RUSSIA-with-BF
Japan
USA
Italy
Canada
EU
Mexico
Australia
Germany
India
China
South Africa
Argentina
Turkey
Russia
UK
Saudi Arabia
South Korea
Indonesia
African Union
Brazil
France
60
triad of regional trading blocs
EU (Western Europe)
ASEAN (Asia) - "look at each other first then external nations"
USMCA (North America) -
61
2 major tasks faced by global managers regarding EU
1. How firms outside Europe deal with market giving preference to member countries.
2. How to deal effectively with multiple sets of national cultures, traditions and customs within Europe.
62
regional trading bloc (RTB)
intergovernmental agreements where member countries reduce or eliminate trade barriers
63
other RTB
- CER (Aus, NZ)
- Commonwealth of Independent States
- South Asia FTA
- MERCOSUR (South America)
64
Belt Road Initiative (BRI)
global infrastructure development strategy to facilitate Chinese trade all over Asia, Europe and Africa
65
favourable competitive and market factors BRI
- cheap labour
- low costs
- competitive intensity
- internal infrastructure growth
- developing strong positions in high-tech industries
66
challenges BRI
- imported vs home-grown innovation
- weak legal and regulatory systems
- limits on foreign competition in strategic industries
- growing domestic affluence and rising labour costs
67
other agreements
APEC - create environment for safe and efficient movement of goods and services across borders in Asia-Pacific.
TPP - settles investor-state disputes in Trans-Pacific
TPPII - separate from TPP but refers to it and includes most of its provisions in Trans-Pacific
68
impediments to business growth
lack of capitalist structure and systems to reproduce Western management practices
69
discouragement FDI in less developed countries
economic situation
often unacceptable level of government intervention
70
2 demands on international managers
1. assess risk-return tradeoffs
2. keep up with political developments in LDCs
71
bilateral free trade agreements
free trade agreement between 2 countries
eliminates:
- tariffs, other trade taxes
- dumping
- unfair subsidies
standardises regulations, labour standards, environmental protections
adopt each other's copyright and IP laws
72
advantages to BFTAs
- increase trade
- open markets to industries
- easy to negotiate
- stimulate job creation
- lower consumer costs
- quicker to take effect and reap benefits
73
disadvantages to BFTAs
- less successful companies can go out of business
- companies find it difficult to compete with more powerful industries in other countries
- companies lose protected price advantages
- workers can lose jobs
- can trigger competing bilateral agreements between other countries
disadvantages whittle away advantages
74
noodle-bowl effect
negative consequences of existence of large numbers of FTAs that make it difficult/complicated to deal with as they create a complex web of trade agreements
